North American Grain/Oilseed Review: Canola drops with beans
By Phil Franz-Warkentin and Terryn Shiells, Commodity News Service Canada
December 2, 2014
Winnipeg – ICE Futures Canada canola contracts were down on Tuesday, retreating from earlier gains as the initial buying interest ran out of steam and sharp declines in the CBOT soy complex spilled over to drag canola down as well.
Oversold price sentiment, a weaker Canadian dollar, and good domestic crusher demand had all helped give canola an early boost, according to participants. The most active January contract had rose by over five dollars per tonne in overnight activity.
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However, the independent strength was short lived, and large losses in soybeans and soyoil eventually spilled over to pull canola down as well. Some sell stops were hit on the way down, as prices moved below nearby support levels, according to analysts.
Statistics Canada releases updated production estimates on
Thursday, December 4, and positioning ahead of the report was likely behind some of the activity. Traders are generally anticipating upward revisions to the canola production number, but the extent of those adjustments remains to be seen.
About 29,399 canola contracts were traded on Tuesday, which compares with Monday when 27,210 contracts changed hands. Spreading accounted for 20,870 of the contracts traded.
Milling wheat and durum were both untraded. Barley was steady to lower, with all of the 50 contracts traded tied to participants exiting the December contract.
SOYBEAN futures at the Chicago Board of Trade were sharply lower on Tuesday, with the January contract falling below the key US$10.00 per bushel level. Prices ended 16 to 21 cents US per bushel lower.
The market was reacting to news that weather is expected to be favourable for soybean crops in South America this week. Brazilian forecasts are calling for rain that will benefit newly planted crops this week, while dry conditions are expected to help planting move along in Argentina.
The upswing in the value of the US dollar and the large US crop were also undermining the market, participants said.
However, continued strong export demand and improving domestic crush margins were limiting the declines.
SOYOIL futures finished sharply lower on Tuesday, as crude oil values started to tumble once again, market watchers said.
SOYMEAL futures were weaker Tuesday, taking some direction from the weakness in soybeans, traders noted.
CORN futures in Chicago finished five to nine cents US per bushel lower on Tuesday, undermined by spillover pressure from the losses in soybeans, analysts said.
Lackluster export demand for the US commodity and worries that falling crude oil values will reduce demand for corn in domestic ethanol markets were also bearish.
Further downward pressure came from forecasts calling for beneficial weather in Argentina and Brazil this week.
WHEAT futures in the US were lower Tuesday, with Minneapolis, Chicago and Kansas City futures ending three to 12 cents US per bushel lower. Profit taking on recent advances was behind the declines, analysts said.
Spillover pressure from the weakness in corn and soybeans also weighed on the market, as did soft export demand and the strong US dollar index.
However, ongoing worries about cold weather reducing winter wheat production in Ukraine, Russia and the US were supportive.
Concerns about production losses in Australia and South America, due to unfavorable weather, also limited the declines.
• Australia’s department of agriculture lowered their wheat production estimate by 1 million tonnes, to 23.22 million tonnes. Unfavourable weather during the growing season is to blame.
• Japan is looking to acquire 147,000 tonnes of food wheat from the US and/or Canada, according to reports.
• Favourable hot weather has helped the Argentine wheat harvest to reach the half way point, a report from the Rosario Board of Trade said.
Settlement prices are in Canadian dollars per metric ton.
